What is a Data Room?

03 Oct What is a Data Room?

A data room is a digital storage solution that lets documents be kept in a secure environment. It also comes with a variety of features that assist with the due diligence. These include annotation tools that allow for granular access, activity tracking, and watermarking.

Data rooms are typically used to provide security documents to clients (SOC 2 documents or compliance certificates) to support due diligence. This is a great method to accelerate the process and reduce risk by sharing this information with third parties before the transaction is completed.

Traditionally, companies have used email to share SOC 2 docs as well as other documentation. This important site isn’t just inefficient, but also creates problems with the control of version. It is also insecure with the increasing number of attacks on email that result in compromised mailboxes, stolen credentials, and phishing attacks.

Many secure file sharing and storage solutions such as Box and Dropbox allow access to documents from any device and in any location. While they provide a high degree of security, the majority of businesses or individuals require more than this. Documents that are sensitive and are used for fundraising, due diligence or negotiating contracts should be stored in software with more protection.

The most important thing to inquire about a « secure data room » is whether it prohibits authorized users from sharing data with non-authorized users. Unfortunately, the answer is almost always not. The majority of secure data rooms do not restrict the number of times the same user’s credentials can be used to access the system. Users are able to reuse logins on their own devices or copy and paste links into the browser of a friend’s PC.